Community Property States and their Meaning

Which states are community property states? Before that, question is answered, what then is a community property? This is a matrimonial regime that originated in jurisdictions of civil law and can now be found in jurisdictions of the common law. In a community property state, all properties acquired during the marriage are equally divided between the spouses in the event of a divorce. Each of them has a given half-interest in that property and also the debts that occurred during the marriage, except those received by either spouse by way of inheritance. The assets and properties acquired at the time before the marriage or after the couple legally separated or divorced are not anymore included in the calculation.

So which states are community property states? There are 9 of them in the United States: Arizona, Idaho, Nevada, Texas, Wisconsin, California, Louisiana, New Mexico, and Washington. Special rules are in effect to spousal property and income in these nine community property states. It is natural for courts in these states to divide equally all the properties acquired during the marriage between spouses when they are divorced. This can be in a form of one spouse maintaining the title to some assets acquired during marriage, like a house; while the other spouse receives a combination of cash as well as some assets to compensate for the difference in value. Each spouse leaves the marriage with the equal amount of marital properties.

As mentioned, marital property does not include those acquired outside of marriage, such as those incurred before getting married and those acquired after divorce. It also excludes those properties that, although acquired while the spouses are still married, were inherited from parents, grandparents, or other direct relatives provided that the property is in one spouse’s name only and it is not combined with other marital properties. Cash is also excluded if it is a gift or it is inherited from a direct relative. It should be deposited separately in another bank account under one spouse’s name only. Debts acquired during the marriage are also considered marital properties and should also be divided equally between spouses.

Although 9 in the U.S. are community property states, there are no two states that share the same laws regarding this. One state may have judicial decisions and statutes that are opposite from another when it comes to a specific legal matter. In some community property states, income generated from separate properties is considered separate income; while in the remaining community property states, the income acquired from separate property is considered a community property as long as it is generated during marriage.

Community property also has certain tax rules. A community property results in lower capital gain taxes after one spouse dies, and the living spouse sells that property.

Community property problems arise during divorce proceedings and conflicts when one spouse dies. Such conflicts can, however, be avoided if proper state planning is done during the marriage. The main definition behind community property is “Property gained before marriage is separate, and it belongs to the spouse who seized it.

Property seized during marriage belongs to the community property except if it is gained as a gift, inheritance, or when a separate property is gifted to the community.” This main definition has led to a lot of problems, some of which are difficult to determine. One example is a business owned by a spouse before he got married. Clearly, it is a separate property, but what if this business becomes bigger during the marriage? How are the additional properties classified when they are acquired during the marriage? There are many other examples of problems that are difficult to solve when it comes to community property.

Community property consists of all types of properties. This includes real properties, or “immovable properties” such as land and house. It also includes personal properties or those that can be carried or transferred. Examples of which are cash, jewelry, bank accounts, stocks, and bonds.

The pension may have been already acquired before getting married. When contributions are made using community property during the marriage, then the proceeds of it are partially separate property and partially community property. If divorce occurs or a spouse dies, the state’s rules for apportionment should be followed.

Although nine states share being community property states, their laws are completely different and cannot be compared with each other. The laws regarding separate properties and marital properties vary from jurisdiction to jurisdiction.